Rantec Guar Report
The Trump administration tariff battle has taken a back seat to news surrounding the conflict involving Iran. As mentioned in the previous report, U.S. Customs and Border Protection (CBP) has stopped collecting certain tariffs under the International Emergency Economic Powers Act effective February 24. This includes guar gum originating from India and Pakistan. Subsequently, the administration instituted a 10% worldwide tariff. The Trade Act of 1974 allows the President to impose such tariffs for up to 150 days without congressional approval. U.S.–India trade talks have been placed on hold.
This is welcome news for importers; however, uncertainty continues to impact short-term business strategies. Congress currently has larger political battles to address than tariffs, and with midterm elections approaching, many politicians may prefer to avoid publicly defining their positions on tariff policy.
The United States Court of International Trade has issued a ruling requiring CBP to refund certain reciprocal tariffs to importers of record. CBP has indicated its intent to comply with the court order but has requested a minimum of 45 days to develop a process for issuing payments. Initially, CBP indicated that importers will need to request refunds for each individual entry. CBP will then compare those requests with its records and issue a single refund for the total amount. This process will evolve over the next 45 days.
As for the guar gum market, trading activity in India and Pakistan remains subdued and within a narrow range of expectations. The ocean freight market is rapidly adjusting to the conflict involving Iran, including the closure of the Strait of Hormuz and increased risks in the Red Sea. Carriers had recently begun increasing traffic through the Red Sea but have again discontinued this route in favor of transit around the Cape of Good Hope.
This week we have experienced cancellations in existing bookings and are expecting delays of three to four weeks in receiving goods. Ocean freight rates are increasing rapidly due to peak season surcharges and bunker adjustment factors. In addition, the lack of empty containers returning from the Middle East is affecting container availability in both India and Pakistan. Limited availability of Compressed Natural Gas (CNG) shipping is also impacting guar production in India and Pakistan, and plants are working to identify alternatives. Periodic cold weather fronts are also affecting the availability of natural gas to factories, as domestic consumption remains the priority. At this time, we do not expect significant impacts on our contracted factories; however, we will continue to monitor the situation closely.
Rick Bilodeau